Credit Suisse to pay $536 million for U.S. violations

December 16, 2009

By James Vicini and Dan Margolies

WASHINGTON, Dec 16 (Reuters) – Swiss banking giant Credit Suisse Group AG will pay $536 million for failing to comply with U.S. laws, including Iran sanctions violations, according to U.S. court documents filed on Wednesday.

The documents outlined the violations and the settlement, which is known as a deferred prosecution agreement, that ended a five-year investigation.

Later on Wednesday, Manhattan District Attorney Robert Morgenthau plans to announce a deferred prosecution agreement with Credit Suisse, “in which the Swiss bank admits to violating New York State law by falsifying the records of New York financial institutions,” his office said.

In documents filed in federal court in Washington, Credit Suisse was accused of systematically violating the law by moving hundreds of millions of dollars illegally through the U.S. financial system on behalf of entities subject to sanctions, according to documents filed by the U.S. Justice Department.

The court documents alleged Credit Suisse helped Iran and other nations avoid compliance with U.S. laws, violating the International Emergency Economic Powers Act and Iran transaction regulations.

Credit Suisse said on Tuesday it expected to pay $536 million to settle charges with U.S. authorities that it violated rules against conducting business with sanctioned countries such as Iran. (For a statement by the bank on Wednesday, please click here)

The settlement is the second reached by a Swiss bank with U.S. authorities this year.  Credit Suisse rival UBS AG agreed in February to pay $780 million to avoid criminal charges for helping about 50,000 rich Americans evade taxes.

Earlier this year, Britain’s Lloyds TSB Group Plc agreed to forfeit $350 million to U.S. authorities in connection with charges it faked records so clients from Iran, Sudan and elsewhere could do business with the U.S. banking system.

That case was similar to the one involving Credit Suisse.

Credit Suisse first disclosed the probe in 2007.

Analysts in Europe said the settlement should only do short-term damage to the Swiss bank, but other banks could now be in the line of fire.

Other banks to have highlighted potential risks from U.S. economic sanctions in the past include Royal Bank of Scotland Group Plc and Barclays Plc.

Credit Suisse, which avoided state aid and emerged as one of the banking sector winners from the financial crisis, said the expected settlement would likely result in a 445 million Swiss franc ($429 million) charge this quarter, or about 360 million francs after tax.

After strong interim earnings this year, fourth-quarter results were expected to be weak due to the charge and an expected slowdown in private bank inflows due to an Italian tax amnesty, said Kepler Capital Markets analyst Mathias Bueeler.

“While we are a bit surprised about the size of the amount, this is a one-off payment that should have no further implications on Credit Suisse’s business or franchise,” Bueeler said.

Credit Suisse has to pay the $536 million within five business days, according to the court documents. The settlement is subject to court approval.

Prosecution of the bank will be deferred for two years in exchange for the company’s cooperation, according to documents.

(Additional reporting by Grant McCool in New York, Lisa Jucca, Steve Slater, Sam Cage and Rupert Pretterklieber, and Clara Ferreira-Marques in Zurich and London; editing by Lisa Von Ahn and Andre Grenon) Keywords: CREDITSUISSE/

((jim.vicini@thomsonreuters.com; 202-898-8396; Reuters Messaging: jim.vicini.reuters.com@reuters.net))

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